NH Executive Council to decide on loan guarantee for Portsmouth company

By Jim Haddadin

jhaddadin@fosters.com

fosters.com

By Jim Haddadin

jhaddadin@fosters.com

Posted Jan. 18, 2013 at 3:15 AM
Updated Jan 18, 2013 at 6:30 AM

By Jim Haddadin

jhaddadin@fosters.com

Posted Jan. 18, 2013 at 3:15 AM
Updated Jan 18, 2013 at 6:30 AM

CONCORD — Questions about executive compensation at an apparel manufacturing company in Portsmouth have delayed a vote by the state's Executive Council on whether to extend the business a new loan guarantee.

One Source Apparel, a maker of high-quality clothing and sportswear, is seeking a $600,000 line of credit from Kennebunk Savings Bank to provide the working capital for manufacturing and wholesale operations.

After evaluating the company's assets, the bank asked the state's Business Finance Authority to consider whether the company is eligible for a guarantee backed by the state.

Such an arrangement would limit the bank's potential losses. In the event that the company can't repay its loans, the state of New Hampshire would be on the hook for a portion of the debt.

Discussing the company during a meeting of the Governor and Executive Council on Wednesday, Business Finance Authority senior credit officer Mike Donahue said One Source Apparel recently landed a “major contract,” which is anticipated to grow its revenue by as much as 10 percent in the coming year.

The business is also closing in on a second contract to manufacture a private label clothing line for big box retailer — a contract that could generate up to another $2 million during the coming year, Donahue said.

As a result, One Source's owners are asking the bank to increase their existing line of credit from $350,000 to $600,000 to support working capital and sales growth, Donahue said.

The Executive Council previously approved a 75 percent loan guarantee to help the company secure its existing line of credit with the bank, Donahue said.

The Credit Committee of the BFA's Board of Directors has now unanimously recommended extending a new 62.5 percent loan guarantee to help the company secure the loan increase.

If the guarantee is granted, the state's maximum loss would be $375,000, should the company default on its payments.

Although the Business Finance Authority has signed off on the plan, the final decision lies with the governor and members of the Executive Council.

During a hearing on the proposal Wednesday, at least three Executive Councilors voiced their apprehension about granting the new loan guarantee, voicing concerns about the company's existing debt load and the size of recent payouts to its owners.

“Frankly, the owners of the company have taken ... what appeared to be an incredibly large amount of income, personal income, out of the company in the last two years,” District 3 Executive Councilor Chris Sununu said Thursday.

Sununu said the two owners have received an estimated $1 million each from company during the last two years.

“There's a reason why the banks didn't want to touch this without the state's backing it,” Sununu said during Wednesday's meeting, “and that, frankly, is because of what I would consider the irresponsibility of the owners.”

Sununu also pointed out that creating jobs in New Hampshire is one of the objectives of the loan guarantee program, and the proposal involving One Source Apparel might not necessarily translate into job growth locally.

Headquartered on West Road in Portsmouth, One Source has 12 full-time employees in New Hampshire. It also has offices in Ho Chi Minh and Shanghai, and employees an estimated 60 workers in manufacturing operations in Asia, according to Donahue.

Representatives of the company were not present during Wednesday's Executive Council meeting to answer questions about the loan guarantee. Councilors voted to table the matter for review at a future meeting before taking action.

“This just came across to us as not really a good, potentially, use of the state's guarantees,” Sununu said Thursday. “There's a lot of other good projects out there. You need to make good decisions.”